Topic 1: Role & Risk Flashcards
1
Q
What are the Risks of Corp Tsy?
A
FX Interest Rate Commodity Prices Liquidity Credit Operational Execution Regulatory Re Financing Re Pricing
2
Q
What is the Objective of Corp TSY (5)
A
- ST cash mgmt
- LT Liquidity
- BS mgmt
- Price risk mgmt
- Operational risk mgmt
3
Q
What are the activities of corp tsy?
A
- Cash mgmt
- Deal execution
- Exposure identification & qualification
- Deal confirmation & settlement
- Accounting & reporting
- Cash forecasting
- Limit monitoring
- Debt raising
- Credit rating mgmt
- Bank account mgmt
4
Q
Short term cash mgmt includes: (6)
A
- Bank account strtucture
- Account sweeping, netting & pooling
- CF forecasting
- Daily cash mgmt
- ST borrowing
- ST investment of surplus funds
5
Q
LT liquidity mgmt includes; (6)
A
- LT cash forecasting
- Debt portfolio structure & execution, including maturity profile
- Fixed/ floating mix
- Funding & participation in acquisitions, divestments etc
- Managing credit rating and relationship with rating agencies
- Managing banking panel
6
Q
Balance Sheet Management involves: (4)
A
- Debt / equity mix
- Listing and equity issues
- Dividend policy
- Returning funds to shareholders
7
Q
Market (price) risk management involves: (7)
A
- identification & quantification of exposures
- strategy development
- interest rate risk
- foreign exchange risk
- commodity price risk
- confirmation and settlement
- credit risk
8
Q
Operational risk mgmt (8)
A
- Develop Tsy policies & procedures
- Oversight of exposures vs approvals
- Tsy information system
- Electronic dealing platforms
- Fraud prevention
- Operational risk mgmt (ERM)
- DRP
- Accounting & reporting
9
Q
Drivers of Tsy Design (10)
A
- company size
- co. maturity
- complexity
- industry diversity
- geographic diversity
- risk appetite
- cost pressure
- tax, legal & regulatory environment
- independence of the business units
- govt (exchange) restrictions
10
Q
What is the role of Corp Tsy?
A
- Support the achievement of broader corp objectives and help ensure the LT viability of the company
11
Q
Tsy design - key decisions (6)
A
- Centralised vs localised
- Focus on being cost or profit centre
- Function or location
- In house banking?
- Outsourced vs internal
- Netting & pooling of accounts
12
Q
Risks to outsourced TSY model (5)
A
- Not guaranteed to be lower cost
- Lack of inhouse knowledge & expertise
- Communication between subsidiaries & treasurer
- Setting the right benchmark for measuring performance
- Disassociation of risk & accountability
13
Q
Benefits to outsourced TSY model
A
- Access to deeper pool of talent / skills
- Economies of scale
- Enhanced controls environment especially SoD
- Access to enhaned systems, policies & reporting
- Reduced errors, fraud etc
- Disaster recovery / business continuity
14
Q
TSY as in-house bank
A
- TSY acts as the bank for all business units, subsidiaries, etc
- TSY borrows & lends to business units via intercompany loans / deposits
- TSY pools all exposures & manages them with the banks & external mkts
- Global or regional basis
- TSY is the only external face for the company
15
Q
What is risk
A
- Probability or threat of quantifiable damage / injury / loss that may be avoided by preemptive action
- Return on investment is lower than expected
- Loss or drop in value
- Potential of loss
- Hazard becomes disaster
- Adverse outcome
- Differs with time frame
- Isn’t just price, can be quantified, can be mitigated but not always eliminated
- Can be different depending on what side of the position you are on.
- Outcome, Impact, Direction, Time
- Threat vs opportunity
